MOG’s $5 Monthly Music Service Highlights Spotify Obstacle

(Photo courtesy of flickr user Spakalakazifeuln)

The social music network MOG, one of our 10 hottest music sites last year, has signed deals with all four major labels and indie aggregators to launch an unlimited on-demand streaming service that will cost $5 per month starting Thanksgiving Day, Nov. 26.

We first caught wind of this plan last December, when the company’s CEO David Hyman gave us a sneak preview. Back then, the plan was to offer this as a free, ad-supported service, but Hyman says that is not possible due to the high cost of licensing on-demand music for the United States.

“We were exploring that model, but ultimately, that model doesn’t work,” Hyman told Wired.com. “That’s not limited to MOG — that’s for every company … none of these labels are doing it at a price point where you can offset it with ad dollars. It’s very simple economics.”

What about Spotify, we asked? “Even with an upsell to subscriptions, you just can’t make it work,” he responded. “The rates are too high.”

TunesBag’s Hansjörg Posch, who has also spent time wrangling licenses for a service launching later this month that will be crippled in the United States, agreed that Spotify will face licensing problems here. “It’s rather not possible to launch an ad-supported, on-demand service in the States,” he said. “The business model just doesn’t work.”

Even worse for Spotify’s chances of launching a free version accessible in the United States (as it did earlier this year for Europe), Hyman — who has spent the last year or so negotiating with the labels — says some of them are now refusing to license any free, ad-supported music service whatsoever, be it MOG, Spotify or any other company.

Spotify couldn’t comment about certain labels’ stance against ad-supported music, but a spokesman said that in terms of the U.S. launch date, “we’ve pretty much always said late 2009 or early 2010, but again it’s dependent on when we secure the licensing rights.” (Elsewhere, Spotify co-founder Daniel Ek admitted that the U.S. version of the service might differ from the European version — it’s likely that he’s running into the same unmanageably high licensing rates or outright refusals that Hyman encountered.)

Given those licensing rates, the MOG All Access subscription, currently available as a closed beta, will cost $5 per month for streaming (and eventually mobile) access to a growing catalog that already contains 5 million songs. The company’s licenses will also allow all 700 or so of its official bloggers to post songs from the entire catalog for anyone to listen to, even if they’re not paying for the premium account, which could draw more traffic to MOG’s blogs.

Napster also charges $5 for on-demand streaming access to millions of songs, but Hyman says MOG’s “better on-demand [technology], better discovery features [such as MOG’s interactive radio], and better and sharing tools” will help it surpass that service. MOG currently boasts 8.5 million unique visitors per month, and plans to offer a free trial of the service that doesn’t require users to enter credit card information beforehand when MOG All Access becomes available to the public on Nov. 26.

As for Spotify, its prospects for launching a free, ad-supported version accessible in the States like the ones our European friends enjoy are decidedly murkier.